A&B Foods Data for the year ended December 31,2012,are presented below.
$\begin{array}{l}
\text {Sales (100\% on credit) } &\$ 2,100,000 \
\text { Sales retuns } &150,000 \
\text {Accounts Receivable (December 31, 2012) } &420,000 \
\text { Allowance for Doubtful Accounts } &\
\text {(Before adjustment at December 31, 2012) } &25,000 \
\text { Estimated amount of uncollected accounts based on an aging analysis } &75,000
\end{array}$
-Refer to A&B Foods.If the company estimates its bad debts at 4% of net credit sales,what amount will be reported as bad debt expense for 2012?

Question

A&B Foods Data for the year ended December 31,2012,are presented below.
$\begin{array}{l}
 \text {Sales (100\% on credit) } &\$ 2,100,000 \
 \text { Sales retuns } &150,000 \
 \text {Accounts Receivable (December 31, 2012) } &420,000 \
 \text { Allowance for Doubtful Accounts } &\
 \text {(Before adjustment at December 31, 2012) } &25,000 \
 \text { Estimated amount of uncollected accounts based on an aging analysis } &75,000
\end{array}$ 
-Refer to A&B Foods.If the company estimates its bad debts at 4% of net credit sales,what amount will be reported as bad debt expense for 2012?

Quizplus · Accepted Answer

First, we need to calculate the net credit sales which is the total credit sales minus the sales returns:
Net Credit Sales = 2,100,000 - 150,000 = 1,950,000

Then we can calculate the amount of bad debt expense based on the estimated percentage of bad debts:
Bad Debt Expense = Net Credit Sales x Estimated % of Uncollectible Accounts
Bad Debt Expense = 1,950,000 x 4%
Bad Debt Expense = $78,000

Therefore, the correct answer is C) $78,000.

A&B Foods Data for the Year Ended December 31,2012,are Presented